IRS Provides More Guidance on HSAs.

August 12, 2008

The IRS has had a busy summer clarifying HSA rules.

In May, the IRS published the 2009 thresholds for HSAs and high-deductible health plans (HDHPs). In June, two IRS notices detailed the guidelines for HSA rollovers from an individual retirement account (IRA) and the full contribution rule. The same month saw a long-anticipated "grab bag" of HSA guidance on a variety of topics.

Finally, in July, the IRS published proposed regulations on HSA comparable contributions as well as excise taxes for COBRA, HIPAA portability, HSAs and Archer Medical Savings Accounts. These regulations are contained in Treasury Regulations §§54.4980B, D, E and G.

• Employers can contribute less to the HSA of a highly compensated employee (HCE) than a non-HCE. However, similarly situated non-HCEs must receive a comparable contribution. It is impermissible to vary the contribution within the same group of non-HCEs (e.g., office non-HCEs vs. field non-HCEs).
• For midyear eligible participants, contributions can be on a pro rata basis or a full year basis, but the method must be equal and uniform. Thus, an employer with a $1,000 annual contribution could contribute $250 or $1,000 to participants who become eligible on October 1.
• Employers may contribute more to employees in a higher tier of coverage (e.g., self-plus-one vs. self-only), even if all of the employees in the higher tier are HCEs.
• Rollovers from Health FSAs and HRAs must be made available to all eligible employees. Employers are permitted to limit eligibility for such rollovers to employees who are covered under the HDHP.

Regarding the excise taxes, the regulations provide deadlines for reporting violations and dictate that form 8928 be used for this purpose. The IRS has not yet published this form.

The regulations will take effect when published in final form for plan years starting on or after that date.

A copy of the proposed regulations is available here.